One of the most discussed topics among SaaS companies is how salespeople should be compensated. To see where Israeli startups stand vis-à-vis the international benchmarks, we surveyed both portfolio and non-portfolio companies about their sales compensation policies.
We believe that this survey can be used as a great “sanity check” tool for CEOs, CFOs and CROs, to help them formulate the rationale for their sales compensation plan.
We are happy to share the results of the survey along with our comments, which we hope will be a useful guide for companies in the future.
What is the annual quota for an Inside Salesperson?
Most of the responses put the annual quota at $400-700k / yr which is in line with worldwide industry benchmarks.
To ensure that the operation is efficient, keep in mind the following rule:
Inside Sales quota = x8-10 of base salary
What is the annual quota for a field salesperson?
The survey results were very clear and in line with industry benchmarks. A $1-1.2 million quota is a good place to be, as it will allow for scaling of the team.
Important to note: These numbers reflect new ACV only. Any renewal target should be on top of the desired quota.
What is the average commission for new ACV?
Based on the outcome of the survey, the commission on new ACV is roughly 10%, i.e. a salesperson with a $1.2 million quota will get $120k in commission, which comprises 100% of the variable part of the compensation.
Remember, however, that due to revenue recognition, total commissions in the company’s P&L can even reach 15% of recognized revenue.
What is the commission rate for renewals?
It’s surprising that 22.2% of the respondents don’t give commission at all for renewal. This is a problematic approach.
Renewal compensation should be around 2-3% of the contract value and should be provided even if done by the customer care (rather than sales) team.
Who should be in charge of renewals?
The subject of who actually does (or should do) the renewals is controversial. The two most common approaches in the market are to delegate the renewals to either sales and customer care.
From our experience, when ASP is low, customer care is in charge, and when ASP is high, the sales department is responsible for the entire customer journey.
Who should be in charge of expansion?
As per the controversy around the renewal question, here we also see a division between the responsibilities of sales and customer care.
We believe that in the future, renewal and expansion will merge into the same department.
Do you provide accelerators for multi-year deals?
There are huge opportunities for improving a company’s financials by providing the right accelerators/incentives.
We would expect to see more usage of this tool.
When do you pay commission?
The result for this question was surprising. The world is moving fast towards commission payment upon collection — especially since free cash-flow is becoming an increasingly important parameter when valuating companies.
We would have expected more companies to pay upon collection and recommend a review of this policy for companies that don’t.
If you would like to download these survey results as a PDF, you can do so from SlideShare: